David Cameron has announced plans to make government finance schemes available to Islamic students and entrepreneurs.

The Prime Minister said student loans, start-up loans and the enterprise allowance would be made compatible with the religion's strict rules on finance.

Speaking to guests at his annual Eid al-Adha reception in Downing Street, the Prime Minister said he wanted the UK to be a world centre for Islamic finance.

Details of how the schemes will operate within the rules of Islamic finance, which prevents the charging of interest, have not been made public.

But the schemes will be open to non-Muslims and anyone taking the loans out will repay the same amount as other borrowers, Number 10 said.

Mr Cameron said last night: " I want Britain to be one of the world's centres of Islamic finance - from the highest and mightiest financial institutions all the way to start-ups.

"We've got tens of thousands of young people starting their own businesses and tonight I can announce that we will make sure that there is a type of start-up loan that is totally consistent with all the principles of Islamic finance.

"We must do that for start-up loans, we must do that for student loans and we must do it for the enterprise allowance. That's what a welcoming, tolerant, multi-racial country does."

The Government hopes that the compliant start-up loans will be available within two years.

Under the plan, instead of paying 6% interest on the loan, applicants could pay the equivalent charge to cover the cost of the mentoring and support they receive - benefits which are included as part of the existing scheme.

Details were still being worked out, with Muslim student bodies and financial institutions being consulted.

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